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Currency Market Analysis

Nov 05, 2019 | Currency Market Analysis

Global Themes

Safe havens buckled as upbeat rhetoric with respect to the U.S.-China trade war persisted. The Swiss franc and yen flirted with one-week and three-month lows, respectively, against the greenback. America’s dollar fared mixed but mostly steady with gains against its Japanese and Swiss counterparts and the euro. Trade-sensitive currencies that would tend to benefit the most from a trade truce outperformed with the Aussie, kiwi and Canadian dollars higher, along with emerging markets. The latest reports suggest that Washington and Beijing are making strides toward a first phase trade deal as soon as this month. Even a modest trade pact would help diminish uncertainties that have held back global growth and led an increasing number of central banks to ease monetary policy. Trade will remain a hot topic today with the U.S. and Canada releasing trade balance figures. The U.S. will also issue influential services growth data. 


Canada’s dollar neared one-week highs as buoyant markets, including oil, offered support. Currencies whose economies rely on trade as a chief growth engine would tend to prosper from progress on the U.S.-China trade front. U.S. stocks powered to all-time highs while the price of oil this week neared six-week highs above $57. To sustain its nascent turn from multiweek lows, it would help the loonie if Canadian numbers today on trade and Friday on employment offer more evidence of a resilient economy. 


The Aussie dollar flirted with three-month highs as tentative happy trade talk continued between the world’s two biggest economies. Progress on trade, if achieved, might allow Australia’s central bank to keep its hand on the pause button with respect to interest rate cuts. Overnight, the Reserve Bank of Australia left borrowing rates steady at all-time lows of 0.75% following a trio of rate cuts this year.


Sterling firmed above one-week lows as it shadowed Britain’s leading services industry higher. Britian’s economy-driving services sector climbed out of the red with its PMI rising to 50 in October from a contractionary 49.5 in September which was the weakest reading in six months. The Brexit plight has shifted to the backburner with Britain in campaign mode ahead of early elections in mid-December with Conservative Prime Minister Boris Johnson pinning his hopes on his party winning a parliamentary majority. 


The euro neared one-week lows as Wall Street’s record run helped whet investor appetite for dollar-denominated assets. The euro also struggled after Europe issued another reminder of the weak shape of the bloc’s economy. A gauge of wholesale inflation fell at a faster rate in September, validating the ECB’s shock and awe caliber stimulus measures such as subzero interest rates. 

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